REACH Revisited, Part 1: The Cost of REACH’s Registration Requirement

This is the first in a short series of articles on REACH’s registration and data-gathering requirement. Here we explore REACH and the costly, cumbersome nature of its chemical registration process. In Part 2, we look at alternative regulatory models adopted by Canada and Japan.

REACH in Brief

REACH is shorthand for Registration, Evaluation, Authorisation and Restriction of Chemicals. Adopted and enacted by the EU in the mid-2000s, REACH is meant to be an all-encompassing legislative structure for the identification and management of chemical substances. Its goal is simple, but lofty: protect the environment and human health.

A core element of REACH is its registration and data-gathering requirement: stakeholders must register substances with the European Chemicals Agency (ECHA); ECHA then evaluates the substances and determines which safety restrictions to impose, if any. Substances ECHA deems potentially more hazardous than others take priority in evaluation. Although this requirement may sound innocuous, it has proven to be one of the most controversial aspects of REACH.

“No Data, No Market”

Amplifying this controversy is the “no data, no market” principle: under REACH, manufacturers cannot market any product before it has gone through the registration process from A to Z. On its face, the principle seems fair. But the devil is in the details. As Lawrence Kogan summarizes:

The registration requirement applies to each legal entity within the EC that manufactures/formulates within or imports into the EU one ton or more per year of either existing or new substances, or articles containing more than one ton of substances per year…. The registration/data-gathering requirement obliges all such entities:

• To gather information in the form of a technical dossier describing those intrinsic characteristics of each substance posing human health and/or environmental hazards “through literature search, data sharing [and] if necessary testing,” but to generally avoid vertebrate animal testing;
• To use that information generating exposure information, in preparing chemical safety reports (“CSRs”) assessing the risks from identified uses, and for putting in place and recommending risk-management measures that would ensure the safe use of each substance;
• To submit such information to a newly created centralized regulatory Agency known as the European Chemicals Agency (“ECHA”) for review, and for inclusion within a newly created central chemicals database to be administered by ECHA; and
• To share the gathered information with the rest of the manufacturing supply chain through voluntary consortia and mandatory Substance Information Exchange Forums (“SIEFs”) for purposes of ensuring: a) the supply chain members’ safe use of such substance(s) and b) the submission of joint supply chain registrations that permit new supply chain registrants to refer to previously prepared studies which serves to minimize the likelihood of duplicative vertebrate animal testing.

If that sounds like a lot of work, that’s because it is. When the European Commission proposed REACH, members of the World Trade Organization (WTO) immediately raised concerns that the registration and data-gathering requirement would hinder international trade. Their main objection was that the requirement was more restrictive than necessary, and their arguments focused on two points: the requirement is too cumbersome, and it is too costly.

Why Cumbersome?

Among other reasons, the requirement is hazard-based as opposed to risk-based. Think of “hazard” as the potential for causing harm; think of “risk” as the odds of a hazard actually causing harm. Because REACH requires enterprises to register all chemical substances based on hazard, the scope of pre-registration research expands tenfold. At a minimum, the research becomes substantial; more likely, it becomes pointless, since once the substance is registered, ECHA may deem the risk to be low either way. The result is redundant labor, both for enterprises and for the EU’s institutions.

Adding to this labor is the sheer volume of requests the European Commission and ECHA receive from non-EU stakeholders asking for clarification about the logistics of the registration requirement. The two bodies appear wholly unprepared to handle the workload, resulting in delays and confusion.

Why Costly?

A European Commission evaluation of the chemical market after the introduction of REACH indicates that chemical manufacturers and importers spent over 2 billion euros on compliance-related expenses in the first REACH registration period, nearly twice what the Commission had originally estimated. The expense stems from incremental human resources, research, communication, and IT costs, not to mention ECHA fees. Consider the following (non-exhaustive) list of expenses an enterprise can expect to shoulder under REACH:

• One to 100 full-time employees dedicated to the company’s compliance obligations, each paid a salary of approximately €50,000 per year;
• ECHA registration fees, which can range from €1,200 to €31,000 per registered substance, plus fees for additional ECHA services, such as a request for access to a study summary, which can range from €1,500 to €29,500 per service; and
• Compliance-related IT applications and systems, which cost upwards of €1,000,000 to €3,000,000 for a smaller company and between €5,000,000 and €15,000,000 for a larger company.

The Effect on the Market

Not surprisingly, these figures have had a negative impact on the overall chemical market. Some companies have even decided to partially or fully withdraw from the European market. Most restrictive policies tend to have this effect, but REACH raises a serious question as to whether its costs outweigh its benefits. A helpful exercise is to look at the bigger global picture: if the registration requirement is inadvertently acting as a barrier to trade, what might the alternatives be?

Whatever a company’s view of the registration debate, tracking which of its own substances and articles fall under REACH’s SVHC and restriction lists is a separate, practical problem. See how MatCheck tracks REACH SVHC and RoHS compliance across your BOMs, or read what the REACH SVHC Candidate List requires today.

In Part 2, we look at the chemical regulatory frameworks of Canada and Japan. Canada’s Chemicals Management Plan (CMP) and Japan’s Chemical Substance Control Law (Kashinho) present alternatives to REACH that are worth considering. Continue to Part 2: Canada and Japan.